NVIDIA’s NASDAQ: NVDA Growth is slowing, and margins are expected to shrink, but then what? The company’s business has grown nearly 800% in the last four years and continues to grow. Growth will eventually peak, but business is expected to be at a higher level due to the AI revolution.
NVIDIA’s first-mover advantage and dominant position in the DC market is well-positioned to benefit from this Permanent technology upgrade cycle that it began AI technology will take giant strides in the next few years.
Globally, data centers are upgrading to NVIDIA Semiconductor Infrastructure to keep up with demand from and for AI. Critical details of the Q3 results show that demand for Hopper, the current generation of AI, and Blackwell, the next generation, is “unbelievable”. The only thing that will hold this company back in the next two to four quarters is supply, which is ramping up.
NVIDIA produces another excellent quarter
NVIDIA stock forecast today
$164.15
Up 21.29%buy medium
Based on 43 analyst ratings
| High forecast | $200.00 |
|---|---|
| Average forecast | $164.15 |
| Less predictable | $85.00 |
NVIDIA’s Q3 results These are perhaps the best performances it has had in the past two years with consistently strong results. The company’s growth slowed to just 95%, but that’s on top of the 205% growth it generated last year in Q3 and well above consensus. The company’s performance at 1300 basis points above the consensus reported by MarketBeat is quite impressive but more so due to the revised trend.
Analysts raised their revenue and earnings forecasts by the time the report was released, setting the bar very high. Strength is concentrated in the DC business, up 112% YOY and 87% revenue, but all segments grew. The core gaming segment accounted for 15%, Pro Visualization 7%, and Automotive 30%, showing broad-based strength within the portfolio.
Margin news is also strong. The company improved gross margin by another 60 basis points, and operating income increased by 110%. Net income is up more than 50%, and adjusted earnings are up 103%. The important detail in cash flow and balance sheet is that positive cash flow is strong, driving enviable balance sheet improvements.
The company’s cash balance is up nearly 50% YOY to $38 billion, leaving it in a net-cash position relative to total liabilities, not just relative to its very low debt. Shareholder equity is also rising, around 50% YOY and expected to continue to grow.
The takeaway from this data is that the company is well positioned to do whatever it wants, including significant shareholder returns. The potential for aggressive share repurchases, special dividends, and dividend increases increases with each quarter. Repurchases in Q3 were sufficient to offset weakness and continue to reduce share count.
Guidance is another factor favoring rising share prices. The company says Blackwell’s demand is outpacing production, but production is increasing, so investors can expect revenue to remain stable, if not grow, in F2025. Regarding the fourth quarter of fiscal 2024, the company expects another sequential revenue growth, with revenues up around 70% YOY, and margins to remain strong.
Analysts guide the market towards higher price points
The Answers to the analyst The initial market reaction to the news is different. Analysts raised their price targets, showing a growing belief that NVIDIA will trade at around $200 over the next twelve months. The price move to $200 is about 40% above the important support target and will likely be seen as a bearish target in the West. The sentiment-inducing trends are still in place, analysts suggest Upgrade and modification trends Q4 and will continue in fiscal 2025.
Price action in NVIDIA shares pulled back after the Q3 release but, nonetheless, remained bullish for investors. The pullback is less than 5%, and the critical resistance target is yet to be broken, which was the previous all-time high. The likely scenario is that the market will retest the support at the previous all-time high and confirm, if not confirm, the support at the higher level, leading to a new all-time high this year. goes In this case, NVIDIA shares could touch the $200 level in the first half of 2025.
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